On your 18th birthday, you become a legal adult. This age gives you access to a lot of things. You are allowed to vote in municipal, state and federal elections. You can consent to your own medical care without a parent/guardian. You can register to become an organ donor and give blood. You can create a will. But can you buy a credit card?
The answer to this is a little complicated. Technically, you can get your first credit card when you are 18 years of age — with some restrictions. Read ahead to find out more.
The CARD Act
While you can technically apply for a credit card at 18 years of age, the CARD Act prohibits you from accessing the credit account on your own until you are 21. Why is that? This legislation was put forward to protect young adults from taking on too much credit before they were ready.
Unfortunately, this does make accessing a common credit tool difficult for young adults. Credit cards are better for online shopping because they make it easier to dispute charges and prevent financial fraud in comparison to debit cards. They also come in handy for booking flights, booking hotels, purchasing large electronics and handling emergency expenses when you don’t have enough savings on hand.
So, how can young adults access credit?
Using a Co-signer
Many banks allow adults over the age of 18 and under the age of 21 to apply for a credit card as long as they have a co-signer. A co-signer is a form of collateral—this is essentially a form of insurance for the lender, allowing them to mitigate the risk of defaulted payments.
A co-signer agrees to take on the responsibility of payments in case the main signee can’t cover them. So, if you rack up a high balance on your credit card and can’t handle the repayments, then your co-signer will have to tackle them instead.
Sharing a Credit Card
Another option that you should consider is sharing a credit card account with a parent or guardian. They can add you as a joint user. This will give you access to the credit they have in their account.
Your parent/guardian will be able to see every charge that you put onto the account, along with any repayments that you make. This level of surveillance could help you stay responsible with your credit card use.
Alternatives to Credit
Credit cards aren’t the only types of credit that you can apply for. You could look into personal loans online as another means of temporarily borrowing funds. Narrow your online search to options in your state of residence. So, if you live in Phoenix, for a personal loan in Arizona and fill out that application. You can be sure that this option will be accessible to Arizonans.
Personal loans should only be used to cover emergency expenses when you don’t have enough savings available. They are not meant for everyday expenses like groceries, utility bills or rent payments.
How is this an alternative? Many personal loans will not have the same age restrictions as credit cards. The qualifications to apply for a personal loan are that you are of legal age to contract. For the majority of states, this is 18 years of age.
Other qualifications that you must meet to apply include having citizenship or permanent resident status, an active bank account, an active email address, a valid contact number, and a steady, reliable source of income.
Don’t get discouraged that you can’t get a credit card all on your own yet. You still have options.